Business Daily Africa
Sarah Kaniaya
Published: November 25, 2008
Members of Kenya’s “Cheetah generation” were honoured for the first time on October 3, 2008 when KPMG and Nation Media Group feted Kenya’s Top 100 fastest growing mid-sized companies. Each company received a trophy with a delicately engraved cheetah on its glass centrepiece.
What’s so special about the cheetah one might ask? The cheetah is one of the fastest animals on earth. Further, as a tourist attraction, it generates revenue.
The cheetah analogy is rapidly gaining popularity. Ghanaian Economist George Ayitteh, business professor, Vijay Mahajan (author of the book Africa Rising) and entrepreneurship researcher Zoltan Acs, are amongst the distinguished intellectuals that have used it.
George Ayitteh says that Africa is influenced by two generations. On one hand, there is the cheetah generation, composed of pro-active Africans, who do not wait for the government to do things for them. Rather, through hard work and perseverance, they use the resources and opportunities available to them to create wealth. On the other hand, there is the “hippo generation” — the ruling elite.
The hippo moves slowly. History shows that African leaders have been painfully slow in enacting beneficial economic reforms. Rather than work hard for the benefit of their people, many grow fat through greed and corruption.
That notwithstanding, delays in enacting progressive reforms can also be attributed to the lack of reliable information on Africa’s growth companies.
This is why Kenya’s Top 100 mid-sized companies’ survey seeks not just to celebrate Kenya’s “cheetah generation”, but also to bridge the information gap on Africa’s growth companies. In carrying out this survey, KPMG Kenya was following the cue of its European counterparts who have in the past sponsored “Europe’s 500.”
The latter survey focuses on fast growing European SMEs and places special emphasis on their contribution to job creation. Companies are ranked using the Birch index, named after the small business research pioneer, David Birch. Birch found that rapidly growing firms (which he named “gazelles”) are responsible for most employment growth.
In June 2008, leading entrepreneurship researcher, Professor Zoltan Acs of George Washington University published a paper entitled High Impact Firms, Gazelles Revisited.
This research revisits and expands on Birches’ research. It is instructive that this research was funded by the US Government’s Small Business Administration Office of Advocacy — the “voice of small business in government.”
The research findings suggest that “local economic development officials would benefit from recognising the value of cultivating high-growth firms versus trying to increase entrepreneurship overall or trying to attract relocating companies.”
Another key finding is that “nearly all the job losses in the US economy over the 12 years covered by the study are by low impact companies with more than 500 employees.” (In this context low impact refers to contribution to employment growth). Put simply, big businesses do not necessarily offer better job security even in developed countries like the US.
Good time
Kenya recently observed the Global Entrepreneurship Week. This is a good time as any for the country’s policymakers to pause and ask themselves, “Where can entrepreneurship development funds have the greatest economic impact?” Is it in nurturing numerous micro and small enterprises whose owners, (through no fault of their own), lack the skills to upscale? Or should more attention be paid to cultivating high growth companies?At the end of 2007, the total number employed by the 416 companies that took part in the Kenya Top 100 mid-sized companies’ survey was 49,696. Of this number, 22, 575 jobs were created in 2005-2007, representing a leap of 83 per cent (See the table).
Further, as the chart shows, 76 per cent of these companies indicated that they were likely to increase their staff numbers in the next 12 months. However this was before the global economic crisis started unfolding.
Billions of dollars have been used to facilitate the creation of micro enterprises in Africa and elsewhere. The importance of microfinance in alleviating poverty is not in question — a Nobel Prize was awarded to one of the pioneers of microfinance in 2006.
We would all rather see our fellow Kenyans engaged in their own micro enterprise than unemployed — a view which reflects the poverty alleviation paradigm. However, under the complimentary wealth creation paradigm, the government and development partners should increasingly seek to nurture growth companies.
Some growth companies can provide jobs that lead to a better livelihood than most micro enterprises ever could. Further, unlike many foreign investors, local investors do not make it a condition that Kenyan wages be amongst the lowest in the world before they can invest in the country.
For the country to achieve appreciable gains in our people’s standards of living, more emphasis needs to be placed on how to foster the creation of “quality” jobs rather than just “any” job. This calls for investment in developing skilled entrepreneurs who will in turn be supported by a skilled workforce.
Nurturing growth companies will therefore include not only heeding SMEs’ frequent calls for a more conducive environment for doing business, but also the allocation of significant funds to research, entrepreneurship and business education. In this way, the country’s “cheetah generation” will be equipped to take Kenya’s micro and small enterprises to the next level.
One notes that the entrepreneurship training programme for the Digital Villages has been delayed due to lack of funds. Perhaps if the “hippo generation” could change their minds and agree to the Finance Minister’s proposal to tax their salaries, this funding shortfall would be met.
Finally, another reason why Kenya’s growth companies deserve attention is the unfolding global economic crisis. Our mid-sized companies need to be positioned to operate in this new economic reality. For example, service providers could facilitate South-South cooperation in technology- transfer initiatives, thus enabling these companies to enhance their innovative capacity for the benefit of their African customers.
http://www.bdafrica.com/index.php?option=com_content&task=view&id=11412&Itemid=5880
